If a project's net present value is zero,the internal rate of return is:

Question

Quizplus · Accepted Answer

If a project's net present value is zero, it means that the present value of its cash inflows is equal to the present value of its cash outflows, discounted at the project's required rate of return or discount rate. At this point, the project has neither a positive nor a negative impact on the firm's wealth. The internal rate of return is defined as the discount rate that makes the net present value of a project equal to zero. Hence, if the net present value is zero, the internal rate of return must be equal to the discount rate that was used to calculate the net present value. Therefore, the answer is B - equal to the discount rate.

If a Project's Net Present Value Is Zero,the Internal Rate